RES 2010-35 ESTABLISHING A FINANCIAL RECOVERY PROGRAM FOR 2011 AND 2012.RESOLUTION leo. 2010-35
RESOLUTION of the City Council of Bainbridge Island, Washington,
establishing a Financial Recovery Program m for 2011 and 2012.
WHEREAS, on August 13, 2010 Moody's Investor Services downgraded to Aa3
from Aa2 the rating for the City's outstanding unlimited tax general obligation bonds and
also downgraded to A 1 from Aa3 the City's limited tax general obligation bonds; and
WHEREAS,, Moody's found that the City had a negative general fund balance in
both Zoo-$200,000and, 2009 (-$48,,000) and Moody's believes the City's significantly
narrowed financial position limits its financial flexibility and its ability to manage future
fiscal challenges; and
WHEREAS, Moody'stated that the fit's aggressive cash -funded capital
spending over the past several gears, combined with a slowdown in economically
sensitive sales tax and new construction fee -related revenues have severely weakened the
city's financial position to lean levels. Staffing -related expenditures grew concurrently,
and the city undertook new capital spending, which both outpaced revenue growth; and
WHEREAS, Resolution No. 2008-01 reaffirmed the City's reserve policies with
the goal of maintaining the highest possible credit gating for all categories of General
Obligation cleft; and
WHEREAS, Resolution No. 2008-01 established an Emergency Rainy Day
Reserve Fund to pay for unexpected emergencies that cannot reasonably b
accommodated by cuffent budget appropriations. The Resolution set the amount ofthe
Emergency Rainy - Day Reserve Fund at no less than % of unrestricted General Fund
revenues; acrd .
WHEREAS, Resolution No. 2008-01 also established a Contingency Reserve to
pay for unexpected needs that were not provided for in the annual budget and for minor
shortfalls in budgeted appropriations. The Resolution set the amount of the Contingency
Reserve at no less than % and no more than % of unrestricted General Fund revenues;
and
WHEREAS.' if the City. fully funded the Emergency. and Contingency Reserves. at
levels set by. existing budget policies the total would amount to 13% of ,general fund
revenues, However, Moody's notes the City's reserve goals are well below Moody's .Aa
Washington cities median of22.7% of general fund rpyenues. In light of the current
economic downturn, these reduced reserve levels have put the.. Citi in a position of
challenged financial flexibility to offset additional near term fiscal pressures; and
f
WHEREAS, Resolution No. 2009- .defined "Working Capital" and t .blished
a target for .end -of -year Working Capital f6r the tax -supported funds at an amount equal
to two months of tax -supported fund recurring revenue; and
WHEREAS, the City Council desires to use the term "General Fund Stability
Deserve" instead of "Working Capital." "General Fuad Stability Reserve" is d # ed as
the ekeess of current assets over current liabilities, which is -ars unreserved, undesignated
and unrestricted -resource that remains part of the general fund budget, The Stability
Reserve will provide the liquidity necessary to accommodate the City's uneven cash
flow, which is inherent in its periodic tax collection schedule. The Stability, Co.ntirigency
and Emergency Reserves will provide financial stability and flexibility and will allow the
City to respond to unexpected adversity and/or opportunities without having to r sort to
short term borrowing; and
WHEREAS, the adopted 2010 budget did not create a Contingency .Reserve nor
did it establish adequate Emergency or Stability Reserves. As a result the City was forced
to borrow $600,000 from the Water Utility in January 2010 in order to pay for operating
expenses due from the General Fund; and
WHEREAS, Moody's outlook for the City is negative because any improvement
in general fund ending balance will be challenged near -terra due to strained growth in
certain revenues and reliance on one-time property sales to achieve general fund balance
polio lever; and
WHEREAS, it is the City Council's intent to adopt a biennial budget for 2011-12
that establishes Contingency, Emergency and Stability Reserves at 100% ofthe levels
established by existing budget policies by the second year of the biennium; and
WHEREAS, the City Council desires to establish a Financial Recovery Ilan that
will provide explicit and unambiguous policy guidance to the City Inger for preparing
the proposed biennial budget for 2011-12; now, therefore,
THE CITY COUNCIL of THE CITY of BAINBRIDGE ISLAND DOES
RESOLVE AS FOLLOWSO
Section 1, Classification and Prioritization of City Services — In the proposed
biennial budget for 2011-12, the City Manager -shall classify every program ,and service
currently provided by the City as either Mandatory or Discretionary. Mandatory services
are -those which municipalities must provide under City, state, or federal lay.
Discretionary services are those that the City has chosen to provide but are not rluired
by lay. For each Mandato- ry or Sl iscr tionary Service, the -City Manager shall detail the
costs of providing the service in both dollars and FTEs. For each Mandatory Service the
City Manager a shall make a recommendation for the level of service to be provided. For
each fiscrtionary Service the City Manager may make a recommendation for the level
of service to be provided and may also recommend elimination of finding for a service or
program.
Section 2. Reserves --- The following reserve levels shall be established in the
proposed 2011-12 biennial budget:
2011 Budget
Contingency Reserve:
Emergency Reserve:
General Fund Stability Reserve,
Total Reserves:
2012 Budget
Contingency Deserve:
Emergency Reserve;
General Fund Stability Reserve:
Total Reserves:
400,000
$ 00!X0
1 500,000
$2,400,000 0 budget policies
$ 800,000
$1popo
$3,1000,5000
$4, 8 00, 000(100% of budget policies)
Section 3. Roads Capital Preservation Program — The Roads Capital
Maintenance & Preservation Program shall be funded at the following levels in the
proposed 2011-12 biennial budget,
2011 Budget: At least $400,000
2012 Budget: At least $400,000
Section 4. Capital Facilities Flan — All projects that are scheduled in the
2009-14 UP shall be postponed. for one year unless the City has already identified the
sources of funds and the staffing resources necessary to complete the project or unless the
projects are required ed by lave or are necessary major maintenance funded by regular
operating budgets. The City Council will complete a full update of the 2011-2016 UP by
,lune 3 0, 2011,
lection 5. New Projects and Preliminary Work — City funding shall not be
allocated for any neer project or any preliminary work on a project until a revenue stream
and staffing resources have been identified that will fully support the completion of the
project.
PASSED by the City Council this 8 1h day of September, 2010,
APPROVED by the Mayor this "' day of September, 2010.
Bob reales, Mayors
ATTEST/AUTHENTICATE:
By: 7)0�*ra7D, �CO,5c�r
Rosalind D. Lassoff, City Clerk
FILED WITH THE CITY CLERKV September 8, 2010
PASSED BY THE CITY COUNCIL: September 8, 201
RESOLUTION I No. 2010-35